Transcript Chapter 2

Chapter
2
Cost Terms, Concepts
and Classifications
Product Costs
Period Costs
 identified with
products produced
 identified with a
period of time
 added to the cost
of inventory
 recorded as an expense
immediately
 recorded as an expense
when products are sold
 selling and administrative
expenses
General Cost Classifications
Manufacturing (Product) Costs
Direct Materials
Prime
Costs
Direct Labor
Conversion
Costs
Manufacturing Overhead
Direct and Indirect Costs
Rainbow Pharmaceuticals Company
• Company president’s salary
• Corporate overhead
Frankfort Plant
Topeka Plant
• Plant manager’s salary
• Plant maintenance
• Plant utilities
Phisicor
• DM
• DL
Clarizac
• DM
• DL
Annapolis Plant
Lansing Plant
Appendix 2A: Special Labor Costs
Idle Time
Overtime Premium
Labor Fringe Benefits
Appendix 2B: Cost of Quality
Cost
Prevention Costs
Appraisal Costs
Total cost
Internal Failure Costs
External Failure Costs
% conformance